Pretend you’re a housing developer in Indianapolis.
You just bought a piece of land, and you want to build an apartment complex there. And because you know there’s an affordable housing crisis, you want to make sure rents are reasonable.
So, you take a popular route for developers in this scenario and apply for low-income housing tax credits from the state to help finance your project.
And while you’re at it, you take a look at a local tax break known as a payment in lieu of taxes, or PILOT.
It’s a deal that’s becoming more and more popular in Indianapolis.
In 2025, the City-County Council approved nine PILOT proposals. This year, as of June, there have been 25 proposals introduced.
How does it work?
With a PILOT agreement, developers make annual payments instead of paying property taxes.
Agreements are made with the Department of Metropolitan Development and approved by the council.
PILOT agreements are reserved for developers who are also applying for low-income housing tax credits, which are funded by the federal government and administered by the state.
PILOT deals can save developers hundreds of thousands or even millions of dollars.
In exchange, the developer agrees to rent units for cheaper than market rate. For some projects, every unit has a reduced rent. Other projects include some units that are rented at market rate.
Developers also need to have a community benefits agreement, which usually includes anything from providing free Wi-Fi to offering nutritional and financial literacy classes for residents.
PILOT agreements typically last for 15 years but can be renewed. The housing stays set at the affordable rate for a minimum of 30 years through the low-income housing tax credit program.
What does ‘affordable housing’ mean?
When it comes to renting, the term “affordable housing” is usually attached to projects financed by low-income housing tax credits, or LIHTC. Sometimes these are called Section 42 units.
Rent isn’t based on your income. Instead, rent is set at 30% of the income limit tied to the unit.
Rent calculations are complicated and have many factors, including whether there’s an allowance for utility bills.
How much money are we talking about?
There are two numbers to pay attention to when it comes to PILOT agreements.
First, the annual payments made from the developer to the city. And second, the amount of money the developer expects to save in property taxes.
Take a southside project in the works from development company TWG as an example.
In that case, the company will make a payment of $72,000 starting in 2029 for a 160-unit apartment building on County Line Road. The payment will increase by 3% every year until TWG pays close to $109,000 in 2043.
The company estimates it will save $4.2 million in property taxes over the same period. Property taxes support public goods such as schools and libraries.
In exchange, the planned 160 units will be reserved for people making no more than 60% of the area median income, which is defined by the federal government. For a family of three, that would be $59,580.
The company’s community benefits agreement includes providing a fitness center for residents and offering monthly job readiness courses.
How you can weigh in
PILOT agreements need to get approval from the City-County Council, which means there are public hearings about them.
Agreements are introduced to the council like any other proposal. Then, they are assigned to a committee. Because the tax break deals with housing and development, the proposal goes to the Metropolitan and Economic Development Committee.
That’s the committee that holds public hearings before final approval from the council.
You can keep up with proposals using the council’s search page (enter “PILOT” in the keyword box at the bottom).
You can also find committee agendas to see what councilors will talk about at their next meeting.
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Mirror Indy reporter Tyler Fenwick covers housing and labor. Contact him at 317-766-1406 or tyler.fenwick@mirrorindy.org. Follow him on X @ty_fenwick and Bluesky @tyfenwick.bsky.social.
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